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Ownership concentration, institutional development and firm performance in Central and Eastern Europe

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  • Balsmeier, Benjamin
  • Czarnitzki, Dirk

Abstract

This paper analyzes the relationship of ownership concentration and firm performance in the context of different institutional environments in 28 Central and Eastern European transition economies. Using the BEEPS data for the period from 2002 to 2009 we find an inverted u-shaped relation of ownership concentration and firm performance for those firms that operate in non-EU-member countries as well as those firms that are situated in less developed legal systems according to Freedom House ratings. We interpret these findings as evidence for a classic agency problem in the lower part of the ownership concentration distribution that is dominated by a 'private benefits of control' problem with rising ownership concentration.

Suggested Citation

  • Balsmeier, Benjamin & Czarnitzki, Dirk, 2010. "Ownership concentration, institutional development and firm performance in Central and Eastern Europe," ZEW Discussion Papers 10-096, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:10096
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    References listed on IDEAS

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    1. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    2. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    3. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    4. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    5. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
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    Cited by:

    1. Dragana Radjen & Nemanja Stanisic, 2017. "Financial Distress and Managerial Turnover: The Case of the Republic of Serbia," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(6), pages 646-660.
    2. Ichiro Iwasaki & Satoshi Mizobata, 2020. "Ownership Concentration and Firm Performance in European Emerging Economies: A Meta-Analysis," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(1), pages 32-67, January.
    3. Ahsan Akbar, 2015. "The role of corporate governance mechanism in optimizing firm performance: A conceptual model for corporate sector of Pakistan," Journal of Asian Business Strategy, Asian Economic and Social Society, vol. 5(6), pages 109-115, June.
    4. Zorica Kalezić, 2015. "Ownership Concentration and Firm Performance in Transition Economies: Evidence from Montenegro," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 4(3), pages 5-64.
    5. repec:prg:jnlpep:v:preprint:id:628:p:1-15 is not listed on IDEAS
    6. Jitao Hu & Longying Hu & Mingzhu Hu & Antony Dnes, 2023. "Entrepreneurial human capital, equity concentration and firm performance: Evidence from companies listed on China's Growth Enterprise Market," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 187-196, January.
    7. Elena Karnoukhova & Anastasia Stepanova & Maria Kokoreva, 2018. "The Influence Of The Ownership Structure On The Performance Of Innovative Companies In The Us," HSE Working papers WP BRP 70/FE/2018, National Research University Higher School of Economics.
    8. I.G. Okafor & Ugwuegbe S. Ugochukwu & Hillary C. Ezeaku, 2016. "The Effect of Board Interest on the Dividend Policy of Nigerian Manufacturing Sector," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 6(8), pages 100-115, August.
    9. Ming Chen & Jiao Wu, 2023. "State ownership may not be bad: Based on bibliometric research (2002–2021)," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1285-1304, March.

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    More about this item

    Keywords

    corporate governance; firm growth; transition economies; ownership concentration;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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